What's New

NEW 2023 STATE OF MICHIGAN INCOME TAX RATE 

Many of you know that the State of Michigan passed a new tax law March 7, 2023 in regards to a new tax rate for 2023 of 4.05%. There are two other issues effected by the new law. One is that if you receive a federal Earned Income Credit you will receive 30% of the credit on your State of Michigan tax return. This part of the law is retroactive to 01/01/2023 for your 2022 tax return and the State of Michigan will be sending you a check for the difference that you would have been allowed between the former amount of 6% and the new amount of 30%. The second issue is the taxability of pensions, IRAs, 401k’s etc. There is a new tier structure which has a phase in percentage over the next four years which calculates the amount of your retirement that will not be taxed to the State of Michigan.

******THIS IS THE IMPORTANT PART :

The State legislature did not pass this bill by an 80% or greater percentage so the bill does not go into law until 90 days after the State legislature closes session for 2023. What this means to you is if you have an Earned Income Credit on your tax return OR you have part of a retirement that is not taxed to the state of Michigan they will not begin processing these returns until that 90 days have passed. So for example if Michigan’s legislature adjourns for the year on December 31st and you have either of the above items the State of Michigan will not begin processing those tax returns until April 1st and they will process them in the order they received them. This means that your State of Michigan refunds WILL BE delayed. This also means that the additional refunds you have due from your earned income credit for 2022 will not be processed until after this date also. We are being told that the additional monies will be sent to you in check form and not as direct deposits.

In conclusion, we will be preparing your taxes as we have during your regular appointment time, we will be e-filing them as usual, but the State of Michigan must delay their processing of the returns that we send in until the 90 days has passed.

NEW TAXATION OF RETIREMENT AND PENSION BENEFITS

Beginning in 2023 for taxes due in April 2024 retirees will have the option to choose the best taxing situation for their retirement benefit by opting in to one of 3 calculation methods each year. Please note that part of this is a phase-in subtraction that will take 4 years to fully phase in, which is for tax year 2026.

The calculation methods that will be available for 2023 retirement income will be:

1.      Tier structure subtraction

2.      Phase-In Subtraction

3.      Michigan employment as a Qualified Fire, Police, and Corrections Retiree subtraction.

The release from the State of Michigan states: “Retirees may need to consult the advice of a qualified tax preparer to ensure you are able to deduct the maximum amount of retirement benefits.”

To determine your allowable retirement or pension subtraction, we will consider:

1.      If your retirement income is considered a qualified distribution

2.      What tax treatments benefit you each tax year.